America Online has sold a 5% stake to Google Inc. for an estimated US$1 billion. This deal binds the two companies closer together and impedes Microsoft's plans to grab a larger share of the lucrative Internet advertising market.

"Our investment underscores our recognition of AOL as a valuable strategic asset and our desire both to contribute to and participate in its future success," said Google CEO Eric Schmidt.

"We're very pleased to build.... on our special relationship with Google in a way that will meaningfully strengthen AOL's position in the fast-growing online advertising business and help drive more advertisers to its Web properties," said AOL.